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Pesticide regulations impair tea industry
By Jiang Yan (China Business Weekly)
Updated: 2004-04-13 10:06

As the Chinese Government sets more concrete goals to promote the welfare of the rural population, the country's tea men are doing their bit to help domestic tea planters and improve the tea industry.

China is the home of tea. Tea of almost 1,000 varieties is grown in more than 20 provinces.

It was booming, but the industry now faces many challenges.

In China, tea producers are burdened by a combined tax rate of 23 per cent on average. And tea processors and retailers have to pay a value-added tax of 13 per cent. These figures are much higher than in other major tea producing countries, such as India and Sri Lanka. India, China and Sri Lanka, respectively, rank as the first, second and third largest tea producers.

Chinese tea producers are hit with agricultural taxes and various fees.

Originally, they had to pay the agricultural speciality tax, which was levied at between 8 per cent and 31 per cent. But in the last two years, most provinces have lifted that tax.

And China will gradually phase out the agricultural tax within five years, excluding tax on tobacco. That is expected to cut the financial burden on farmers, tea planters included, by 50 billion yuan (US$6 billion) per year.

As the central government attaches increasing importance to farmers, agriculture and rural areas, tea producers are expecting to get a reprieve, said Shi Yunqing, vice-president of the Research Association of Wujiurou's Theory On Tea.

Gao Linyi, counsellor of the China International Tea Cultural Institute, who is a former senior official at the Ministry of Agriculture, said: "Tax respite means lower costs and higher profits for tea planters. They will be greatly encouraged by the new policy, which will help them expand production scales and improve labour efficiency."

However, tax reductions alone cannot relieve the tea industry. The biggest problem it faces lies in excessive pesticide residues, analysts say.

Until now, 18 countries have issued 349 items of restrictions on tea imports.

In July 2000, the European Union (EU) released new pesticide standards on tea imports, expanding the number from seven to 134.

In 2001, China's tea exports to the EU dropped 37 per cent. The United Kingdom alone imported 3,000 less tons of tea from China.

Tea is the second largest exported agricultural specialty for China, only after silk products. Up to 40 per cent of China's total output of tea is exported to more than 100 countries and regions in the world. Last year, itexported about 259,900 tons of tea, worth US$370 million, according to Shi. He is also the former general manager of the State-owned China Tea Co Ltd, which is the country's largest tea exporter.

Exports are declining as the EU, Japan and others put up the so-called "green barriers" -- or higher import thresholds in terms of pesticide and fertilizer residues -- against Chinese tea, insiders say.

The EU standards are too rigid and involve trade protectionism, said Barbara Dufrene, secretary-general of the European Tea Committee, during the Second International Tea Co-operation Summit last year in China.

Shi said: "Different pesticides are used in different countries. EU and Japanese standards have less restrictions on the pesticides used in their own countries."

He said India and Sri Lanka are also protesting that the EU's standards are too high.

"Many tea producing countries have realized it unfair if the standards are decided by importing countries," Shi said.

Last November in Sri Lanka, the Inter-government Tea Group under the United Nations Food and Agriculture Organization agreed to establish a special committee to frame out international standards on tea pesticides.

"Even if the committee can produce a proposal, it has to get the nod from every member country. That will be hard and take a long time," Shi said. "However, it is at least a step forward."

He suggested the Chinese Government should at the same time reconsider its standards on tea quality and stay in line with international practices.

The Ministry of Agriculture in January released new and stricter tea standard, which took effect on March 1.

The standard said moister and total ash in tea should be no more than 7 per cent, while water extract should be no less than 32 per cent. The ministry also asked tea planters to reduce the use of pesticides such as HCH, DDT, Dicofol, Fenvalerate, Methamidophos and Acephate.

And the country's tea men will also play their part to boost the industry.

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